A Study on Business Failure and Reorganization

기업도산과 정리에 관한 고찰

The objective of this study is review effective business reorganization measures for tackling financial difficulties for financial managers. The major cause of business failure is incompetent management. Business failure occurs when a company is unable to meet its current obligations, or the net worth of the company is negative : usually the signs of business failure are predictable in advance of its actual accurrence. Discriminant analysis as well as other analytical tools - profile analysis, dichotomous analysis, analysis of likelihood ratios - have been used to predict business failure on the basis of various financial ratios , among those, discriminant analysis has been tell known an excellent technique in predicting business failure. The first question to be raised is whether the business is better off, dead or alive. Assuming the decision is made that the firm should survive, reorganization procedure should be considered. The informal procedures of voluntary settlements used in reorganization are extension : composition and liquidation by voluntary agreement. Unless this settlement is possible by those means, the case goes to the courts for 1ega1 solution. If the court decides on reorganization rather than liquidation, it will appoint a trustee to control the firm for reorganization and to prepare a formal plan of reorganization. the plan must meet the stand of fair, equitable and feasible. In that case, the court will approve the plan.